The FSB monitors and assesses vulnerabilities affecting the global financial system and proposes actions needed to address them. In addition, it monitors and advises on market and systemic developments, and their implications for regulatory policy.

Policy Development and Coordination

In Washington in 2008, the G20 committed to fundamental reform of the global financial system. The objectives were to correct the fault lines that led to the global crisis and to build safer, more resilient sources of finance to serve better the needs of the real economy. The G20 called on the FSB to develop and coordinate a comprehensive framework for global regulation and oversight of what is now a global financial system.

Over the past ten years, FSB members have agreed and are implementing a broad range of policy reforms that address the major fault lines that caused the crisis. We are building more resilient financial institutions and markets, using substantially strengthened common international standards that have been designed to be applicable to different national circumstances. We are addressing the problem of too-big-to-fail. At the same time, we are working to prevent regulatory arbitrage – through which tightening regulation in one sector or region is simply followed by the migration of risky activity elsewhere – and have committed to ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. We are building a framework for robust market-based finance that will promote continuously functioning markets.

By reducing the risk of future financial crises and the consequences of financial instability for the real economy, these reforms are an essential contribution to the G20’s primary objective of strong, sustainable and balanced growth.

At the St. Petersburg Summit, Leaders agreed on the priorities for completing the core elements of reforms, which has four elements:

Financial institutions should be resolvable in an orderly manner without severe systemic disruption or exposing the taxpayer to the risk of loss, by protecting critical functions and by using mechanisms for losses to be absorbed (in order of seniority) by shareholders and unsecured and uninsured creditors.

The level of supervision applied by national authorities must be commensurate with the potential destabilisation risk that such firms pose to their own domestic financial systems, as well as the broader international financial system.